Did a Crash in Money Growth Cause the Global Slump?

Robert Skidelsky

Keynes’s 1936 General Theory was a response to the Great Recession of the early 1930s, which was worse in the USA than in the UK. However, Keynes also discussed the early stages of the Great Recession in his 1930 Treatise on Money, which was much influenced by the Swedish economist, Knut Wicksell. He recommended an extreme form of monetary stimulus, with official purchases of bonds to drive down the long yield. He termed this type of stimulus as ‘monetary policy à outrance’ and it resembles the QE of modern times. In the General Theory Keynes’s emphasis moved towards fiscal policy. However, both books have important lessons in understanding the Great Recession of 2008–09.